NLW changes ring alarm bells for beleagured hospitality

The King’s Speech​ also set out Labour’s plans for enhancing employee rights under the Employment Rights Bill, which would seek to ban the use of zero-hour contracts and ensure “day-one” employment protection on things like sick pay, maternity and unfair dismissal.

However the move, particularly the decision to remove age banding on the NLW, has raised concerns from across the UK pub sector which is likely to be disproportionately hit by the legislation.

They pointed out that having the same level of pay for a 16 year old as a 25 year old may impact on employment decisions for untrained, junior staff.

Award-winning operator Emma Gibbon of the Plough in Cheltenham, said: “While I'm all for being paid an adult wage for doing an adult job, I feel that many youngsters will end up missing out, as why would a business employ someone young and inexperienced when they can employ someone mature, responsible and with previous experience, who can serve on the bar without authorisation ect, for the same wage?

“In hospitality particularly, we take on 16 to 18-year-olds often for their first jobs, they start shy and inexperienced but we nurture, train them and watch them grow. So many of our young staff have progressed from KP roles or glass collectors to chefs, supervisors, managers...but where's the motivation to grow and learn if you can just 'turn up' for the same wage?"

She said the move would mean having to increase wages up the chain as well. “If you have inexperienced 18-year-olds on £12 per hour, then what are we expected to pay a supervisor, chefs & managers, how will businesses swallow these rising staff costs when they are already struggling to make ends meet. 

“As one person put it to me on Twitter, there's only so much you can squeeze a wet sponge before it's completely dry.”

She said that if the Government do go ahead, they need to mitigate the impact in other areas.

The blow to zero-contracts also proved divisive, with some operators welcoming it as a step forward, while others suggested it would impede flexibility.

Serious dread

Brendan Padfield, operator of the Unruly Pig, the number one in the Top 50 Gastropubs​ list, said: “The heralded new employment rights fill me with serious dread. The abolition of zero hours, when trade is so volatile, is going to seriously impact upon us. One Monday we can be rammed and the next Monday quiet: how on earth am I supposed to fix hours each week and then be asked to compensate for cancelled shifts. Hospitality was already under siege so to now suffer yet further battery is at best untimely.”

Tim Bird, MD of the award winning Cheshire Cat Pubs and Bars, added: “Labours view of the future living wage, zero hour contracts and their general view on newly employed employees rights are simply going to further dent the profits and performance of the industry severely.”

However, not everyone was against the decision to try and strengthen employment processes.

Merlin Griffiths, who runs Greenhouse Pubs, said: “At a time when cost pressures have rarely been higher for Hospitality operators it is understandable to see a backlash in regards to the NLW being evened out. And of the many points raised I agree that it would mean pushing up wages for more senior members of staff, and that the lower wages for U21's could be countered by investment in training and skills. 

“Personally speaking, and many operators I speak to concur, staff are hospitality's best asset. People are always worth it. If prices have to rise to pay better wages, then that's a price worth paying - unlike say, putting up prices to fund extortionate energy costs! 

“So, broadly speaking, I am in favour of a single rate NLW and the principles it stands for.” 

However, he echoed calls for the Government to help ease the burden: “On the flip side, it would be helpful to see this cost mitigated in other ways; commercial energy price caps perhaps, lease and tied-tenancy reforms, VAT cuts, rates reform for instance.

“We can make this work, and I urge our government to act with all haste to mitigate the effects of NLW so we can have healthy businesses that support large and properly paid teams.”

British Beer & Pub Association (BBPA) chief executive Emma McClarkin said: “The beer and pub sector creates hundreds of thousands of job opportunities in this country and as a sector we disproportionately employ many younger people.  

“Labour costs are up to a third of pub and turnover and over 20% of colleagues are under 21.  Therefore any substantive changes to National Living Wage bands will increase the overall cost of doing business and therefore should be phased over time with consideration to sectors like ours in relation to timing."

Sustained economic growth

She added: “Having absorbed many of the cost increases during the cost-of-living crisis, there is the real risk that additional increases to the wages bill will feed through to the price of a pint. The sector very much believes in fair rights and fair pay and supports the Government’s focus on achieving sustained economic growth.  

“We look forward to working with ministers on finding ways to reduce the aggregate cost of doing business by reforming business rates and reducing beer duty and VAT so that we can keep the costs of a trip to the local pub affordable for all and deliver jobs creation and economic growth.”

British Institute of Innkeeping (BII) CEO Steve Alton added: “We remain positive towards the principles outlined within the King’s Speech, with growth and opportunities for all at the heart of the new Government’s approach, and whilst we look forward to working closely with Government to obtain the investment needed to unlock our full growth potential, our members are urging caution with regard to the potential changes to the NLW.

"Firstly, any potential further increases in wages need to be supported, recognising the challenges our members face in being profitable, due to the current exceptional costs of doing business.

“Also, the specific changes, as proposed, to remove the current age bands, will increase the wage costs of 18 to 21-year-olds by a third, and potentially dis-incentivise operators from hiring younger, inexperienced team members. What we do so well as a sector is to support the development of talent, often employing young people from all different backgrounds and educational achievements, giving many their first employment opportunity.”

Furthermore, fellow trade body boss, UKHospitality's Kate Nicholls called on the Government to hold off implementing changes next year.

She said: "After a change to age bands this year and a 20% hike to wage rates over the past two years, we urge the Government not to proceed with any significant further changes in 2025.

“Labour costs have risen sharply for hospitality businesses and it has been a challenge for operators to absorb these increases, both to minimum wage rates and subsequent restructuring that has to be made to wages throughout a business.

“That’s why we’ve urged the Low Pay Commission, including in an evidence session this week, to stick to its remit for next year, which would maintain wage rates at 66% of median earnings and include no changes to age bands.”